Wednesday, December 28, 2011

Wednesday, December 21, 2011


If Silver Goes Down All Hell Will Break Loose In The Physical Market: Silver Investment Update
by on Dec 11, 2011
There simply isn't enough physical silver to deal with the demand of a fiat currency crisis. As the paper silver market pushes prices down, all hell will break loose in the physical market.


London Trader - There are Tremendous Silver Shortages
By Eric King

King World News is receiving reports of significant waits for delivery of silver. Today King World News interviewed the "London Trader" to get his take on the situation. The source stated, "It is so tight, the silver market is so tight that we’ve been waiting three weeks plus, before this takedown, for deliveries of size to arrive. I’m talking about tonnage orders. This is also key, most of the silver being delivered was refined after the orders had been placed, and again, that was before the takedown. You can just imagine how long the wait times will be going forward."

"This game is getting so stretched that it’s going to break. You don’t think the Chinese know this stuff. If we get a close above the 200 day moving average in the mid 30’s on silver, watch silver immediately pop $2 or $3. Silver is totally incredible. There is nobody in COMEX silver contracts anymore, other than casino players. The only way they have been able to keep silver depressed is by borrowing silver from SLV to meet immediate demand. That’s the only reason silver isn’t trading $10 to $15 higher right now.

There isn’t enough silver for investors to buy (in large amounts) so they have been using SLV as a flywheel. SLV is over 20 million ounces short on the silver they are supposed to have in the vaults to back the shares which have been issued. The silver isn’t there. So there are people who purchased SLV to own physical silver, but all they have is shares that aren’t backed by the physical silver.

Part of managing the price of silver recently has been for the central banks to attack the gold market. But what is interesting is how this manipulation of the gold price was effected. Obviously, the bullion banks, which are working with the central banks, have inside knowledge as to the timing and just how much gold is going to be available to them.

So, in order for the bullion banks to maximize the effect of the physical gold they get from leasing, they add high scale paper leverage. They then short-sell just enough tranches of COMEX contracts to surgically take out three important support pivots....

"Each of those important support pivots that everyone is watching, like the 50 day moving average and so on, each one of those are taken out in the access market in the quiet trading, overnight, on three successive days. In other words, they take out these three important pivots, which turns the momentum buyers into sellers. It also gets a bunch of funds to start selling as well.

So using as little ammunition (physical gold) as possible, and in thinly traded markets, they take out these pivots. They smash the price, but leave just enough physical gold for going into the fixes because the smart buyers are saying, ‘I’ll take it at this price.’ So, as we go into the fix, they’ve provided just enough physical to satisfy as many of those buyers as they can. They then smash it right after the fix, again, with paper.

That’s what’s happened with gold and it’s the reason it has been manipulated down to these levels. It’s the only way they could do it, and it’s a sign of absolute desperation when central banks are willing to risk giving bullion banks gold they will never, ever receive back.

You don’t think the Chinese aren’t sitting here taking every single ounce of that leased gold? Of course they are. There were actually three enormous physical buy areas that they pierced, where, literally, there was tonnage ordered. I estimate well over 100 tons of physical gold was taken between the first pivot they broke, where these guys loaded up with discounted gold, and this stuff disappears from the West to the East.

These central banks had to be in desperation to allow this borrowed gold to be absorbed by foreign entities. They needed to raise dollars in a hurry and they are extremely afraid of gold going through the roof. I was very, very surprised they got as far as they did (driving gold lower). They had to use an awful lot of gold to do it."

Silver Wars – Attack On The COMEX, SLV And MF Global
by horse237Video Rebel's Blog

It will be a long and twisted path in the silver and gold fields from where we are to where the bankers want to take us for still another fleecing. Hopefully, we can avoid the snare traps the Bilderbergers set for us.

First I want to highlight the recent attack and counterattack on the New York based COMEX metals exchange. Jim Willie said he believes JP Morgan ordered Goldman Sachs and Jon Corzine to take down MF Global because they feared the COMEX would collapse due to a shortage of silver bullion. The MF Global bankruptcy receiver took money from segregated accounts at subsidiaries but gave 1.2 billion dollars to Morgan for unsecured loans. They took money away from the people who had cash and wanted to take delivery of silver and gold bullion.

Jim Willie also says that the bankers on Wall Street and in Europe will be just flat out stealing money from your accounts and pensions. Governments in Europe have been taking money out of private pensions and giving it to Bilderberg owned banks. That is why the Senate and the House legalized warrantless arrest without judicial review. They need to shut you up when the fraud gets exponentially worse than it is now.

Bix Weir is a gold bug but has issued a call to investors to sell their gold and buy silver to break the manipulation of the bullion markets. Silver is a much smaller market and will be easier to break. Ten tons of gold is inconsequential but that could buy 500 tons of silver which could break the COMEX when combined with the other big buyers.

John Embry of Sprott Asset Management launched two attacks on the COMEX. First he filed with the Canadian government to buy 1.5 billion dollars in silver. The last time he did this he sent silver from $18 to over $30. More recently he asked large silver miners to store silver rather than to sell silver and hold cash. It is clear he wants to break the COMEX. If silver is withheld from the market by the miners, then a concerted demand for delivery of silver bullion will in my opinion push the price well past $50 an ounce. This will break the COMEX and the LBMA (London Bullion Market Association.) There is a lot a paper silver and gold out there. The fraud on Wall Street and the City of London is beyond the ability of a normal person to comprehend.

A surge in physical silver purchases will also break the ETFs GLD and SLV which use paper derivatives to simulate the spot price of silver and gold. A deep analysis of SLV reveals that their operating costs are covered from the sale of silver bullion.

I want to present some facts investors need to know.

UBS and Morgan Stanley have been sued for selling paper silver and representing it as bullion to customers even charging them storage for silver bars that never existed.

The COMEX trades paper silver on some days as much as the total amount of physical silver that is mined every year.

James Turk of Gold Money has said that half of the new money invested in bullion goes into silver and the other half into gold. For every ounce of gold mined only ten ounces of silver is mined. But silver has industrial uses that gold does not have. The above ground supply of silver has diminished 93% in the past 40 years. But the ratio of the price of gold to silver is 50 to 1. If gold and silver break free of the current manipulation, the price of silver should rise anywhere from 50 to 100% faster than gold.

Central banks have NO physical Silver to assist in the manipulation of the Silver market but they still have a lot of physical Gold (although much less than they claim).

The Italian government has been taken over by Bilderbergers and Goldman Sachs operatives. They just recently have been leasing out Italian and Spanish gold. As you know, leased gold is not bullion and can be sold five times in order to drive down prices. That is why gold has been going down of late.

When To Sell Silver And Gold

I see no near term sell signals as I do not advise anyone to trade gold and silver daily. Bullion should be held until a gold standard is set up. Walter Burien at has a paper called ‘The Fifty Year Plan’ which is similar to an essay I wrote: A Fractional Reserve Gold Standard: The Next Big Fraud.

If a gold standard does come into existence, gold will have to at least double in price to make it work. That is when you need to sell. What you should buy is yet to be determined.

I do not personally favor a gold standard. But I have suggested that Russia, China, Venezuela and Iran open a network of oil bourses where all purchases are to be made in gold, rubles or yuan. The Chinese would have to revalue their currency upwards and fix it to the ruble. I wrote that essay as a strategic move to stop WW III.

I would prefer a debt free currency like the Greenback and a ban on fractional reserve banking.

My regular readers know that I do not expect the New York or the European Bilderberg banks to go bankrupt. They will be bailed out by Ben Bernanke. The money supply will grow so fast that I expect hyperinflation within 16 months. I define hyperinflation for an international reserve currency like the dollar as beginning at 25%. I do not expect the dollar to collapse until after the 2012 American elections. I think Bernanke will paper the world between now and then.

As I said yesterday, I expect prices to go so high that for a lot of Europeans and Americans food will only be a distant memory.

I should warn you that I am led to believe that the Bilderberg crowd or at least a faction within it wants the COMEX and the LBMA to fail right along with the dollar, the pound and the euro. Running house prices up and down by selling fraudulent mortgages ruins tens of millions of families but it gives bankers more power. Just as running stock prices up and down has done. Or running your national currency down to zero value. Running gold and silver up and down is just one more swindle.

Bilderbergers enjoy inflicting pain and ruin on the common folk as much as they do stealing their money.

Warning: There is a lot of money out there yet to be stolen so don’t expect a collapse next week. And there is a lot of money to be made for the bankers if markets swing wildly between highs and lows.

CAUTION: I am not a financial adviser. I an not qualified to give you advice. And I do not know your situation. Please consult a professional.

SLV Short Position Update
By Theodore Butler|
December 19, 2011 - 8:02am

The latest short position report for stocks was released earlier in the week for positions held as of Nov 30. This was the report that I had speculated would show a decline in the short position of SLV, the big silver Exchange Traded Fund (ETF). Contrary to my expectations, the short position for SLV increased by more than 2.2 million shares to 25.2 million shares. This represents almost 25 million ounces of silver.

I had originally speculated that the short position in SLV would be lower in this report because the price of silver had experienced a fairly significant decline of roughly 10% ($34 to $31) within the reporting period. Most often, similar to what occurs on the COMEX, short positions expand on price increases and decline on price sell-offs. This is at the heart of the silver manipulation. To illustrate that point, the headline number in the CFTC’s Commitment of Traders Reports (COTs), the total net commercial short position, declined by 5,500 contracts from Nov 15 to Nov 29. The total COMEX commercial net position reduction was the equivalent of 27.5 million ounces, representing a 21% reduction over the two weeks. The reduction in the COMEX commercial short position was ten times greater than was the increase in the SLV short position in equivalent silver ounces, just to keep this in proper perspective. To be sure, had the COMEX commercial short position increased during that silver price decline as did the SLV, then I would have really been surprised; but that didn’t happen. Overall, the commercials were able to rig lower prices and speculative long liquidation as is their custom. 
Still, I find the increase in the short position of SLV to be odd. During the reporting period, the price of gold also declined as much as $100. In contrast to the increase in SLV, the short position in GLD, the big gold ETF declined by 30% in the period from 22 million shares held short to just more than 15 million shares. The much smaller gold ETF, IAU, run by BlackRock (which is also the sponsor of SLV) witnessed a decline in its short position of 75%. (You can verify the specific numbers in the above link by inserting the stock symbols).  
The decline in the GLD short position reduced its percentage of total shares outstanding to 3.5%. The increase in the SLV short position increased its percentage share of total outstanding shares to 7.8%. Due to the nature of hard metal ETFs, I believe there should be little or no short position allowed in these highly-unique securities, say of no more than 0.5% to 1% of total shares outstanding. To every shareholder of hard-metal ETFs, like SLV, GLD and IAU and others, the prospectus promises that there will be a fixed amount of metal behind every share issued. The existence of a short position effectively increases the shares outstanding (on an unauthorized basis) and the shorted shares have no metal backing.   
The essence of my criticism of SLV shorting involves two things. An allegation of fraud and misrepresentation to SLV shareholders because metal can’t possibly back the shorted shares and that the short position is manipulative to the price of silver. That’s because the short sellers are shorting SLV shares because they won’t or can’t buy the physical silver as that would cause the price of silver to rise. Even though it was higher earlier in the year, the 25.2 million share short position in SLV is still outrageously excessive by any reasonable standard. I believe that BlackRock, the SLV sponsor, is negligent in not protecting the interests of shareholders and is violating its fiduciary responsibility for allowing such an excessive short position to exist. (Yes, I will be sending this to BlackRock’s chairman and president). 
The issue of short selling in silver can be confusing, so let me try to make it clearer. In derivatives, like COMEX silver futures or options contracts, shorting is required. There must be a long and a short in order to create a contract. If there were no shorting, there would be no market; period. I’m not opposed to shorting in futures in general. My allegation of manipulation in COMEX silver revolves around the unusual concentration on the short side by a few commercial players, most notably JPMorgan. Concentration is the point in futures, not the act of shorting. 
In the stock market, there is a different set up. Short selling is not required in securities for the market to exist, as it is in derivatives. Companies issue shares to investors and those securities trade on exchanges and over the counter. It is not necessary for there to be a short for every long in stocks, as it is in futures and derivatives trading. While legal, short selling in securities is restricted by share borrowing requirements and other measures. I’m not interested in discussing the merits of stock short selling or lack thereof; my intent is to show that shorting in futures is different mechanically than shorting in stocks. Why I am so opposed to short selling in hard-metal ETFs, like SLV, is for completely separate considerations. 
The hard-metal ETFs are incredibly unique securities in the universe of stocks. I believe that this uniqueness accounts for much of the negative commentary about SLV and GLD, in particular. Of the total universe of tens of thousands of different stocks in existence, only a very few are hard-metal ETFs. Even expressing it in an actual percentage is hard. In addition, the hard-metal ETFs are relatively so new to the investment scene that their short history makes them difficult to put in proper perspective. GLD has been around for seven years, SLV for less than six years. Yet in that fairly limited time, each has become the largest publicly owned stockpile of gold and silver on earth. It seems clear that the idea of owning gold or silver by means of owning a stock appealed to a great number of investors. This has nothing to do with whether you should own these securities; that’s up to you. But you can’t objectively analyze silver or gold by ignoring the two 800 lbs gorillas in the room. 
Because the hard metal ETFs are so new, so big and so unique when compared to all other securities, it is easy to overlook other facts unique to them. What accounts for their success is the convenience they offer of holding metal. Every shareholder of every hard-metal ETF believes in the representation of the prospectuses promising a fixed amount of metal for each share issued. Quite simply, every hard-metal shareholder believes metal backs the shares they own and the sponsors foster this belief. But the short selling of hard-metal ETFs completely negates the premise that metal exists behind all shares. Short sellers of hard-metal ETFs do not deposit metal and this results in the creation of shares with no metal backing. 
Nowhere is the situation more critical than in SLV. Starting this year the short position in SLV has grown dramatically, from around 13 million shares to a peak of 37 million shares in the spring. Not only is the percentage of shorted shares of total outstanding shares higher in SLV than in any other hard-metal ETF, it is higher for a very unique reason – there is not enough physical silver available to allow for the normal issuance of shares as dictated by the prospectus. Aside from the harm short sellers are having on SLV shareholders, these short sellers are also manipulating the price of silver. If they had to go out and buy 25 or 37 million ounces of silver to issue shares as dictated by the prospectus, the price of silver would have soared. Instead, the SLV short sellers are helping to manipulate the price of the metal itself by defeating the intent of how shares should be issued. 
This is not the first time I have raised this issue. Back in the summer of 2008, when silver was near the $20 mark, I wrote how the short position in SLV had grown to 25 to 50 million equivalent silver ounces, which was unprecedented at that time. This was back when Barclays still owned SLV and naked unreported short selling was prevalent. This naked SLV short selling played a big role in the collapse of silver from $20 to under $9 back then, just like the SLV short selling this year has contributed mightily to the collapse in silver from $49 to under $30. Certainly, the percentage decline in prices is strikingly similar between 2008 and this year. It is no coincidence that the price collapsed in 2008 and 2011 when the short selling in SLV was at an extreme. 
In 2008, there were no good records to verify my claims that SLV had such a large short position; it was my own proprietary research. At the time, many doubted my premise because of the lack of verification. Short selling data reporting has improved immeasurably since then and today I can provide links to back up my numbers (see above). But the story was the same then and now. I believe the big COMEX short seller JPMorgan had a major role in the SLV short selling back then and this year as well. I can’t prove that, but the regulators can easily do so and I have complained to the CFTC and the SEC about this coordinated short selling in silver, both on the COMEX and in shares of SLV. I don’t think this should be too complex for them to grasp. I’ll create a paint-by-the-numbers coloring book if necessary. 
That an unusual and extreme amount of short selling should appear in the two most important silver trading entities is beyond coincidence. The concentration on the COMEX and the amount of short selling in SLV is stark, verifiable and visible to all. Both will tell you all you need to know about the unusual behavior of the price of silver when analyzed with a common sense filter. But the greatest lesson of all is what all this short selling should tell you about the future behavior of silver prices. 
More than anything else, this need by a few commercial crooks to have to resort to excessive and manipulative short selling should tell you about the real condition of the physical silver market. It is because the silver market is so tight and that large quantities of real silver are unavailable that the commercial crooks have to sell short so blatantly. If you can’t sell the real thing, you sell the next best substitute. Without the COMEX and SLV short selling, the price of silver would be dramatically higher. Since there has never been a legitimate explanation for the concentration on the COMEX or the excessive short selling in SLV, I am convinced both forms of manipulation and fraud are coming to an end, as the scrutiny increases. You should not let up in complaining about these crooked shorting mechanisms or in acquiring the cheap silver they have created.  
To write to the chairman and president of BlackRock, sponsor and owner of SLV, and ask them to protect the best interests of shareholders by eliminating the excessive short selling in shares of SLV, please use these addresses –  Laurence Fink, Chairman and CEO  Robert Kapito, President
 Ted Butler
 December 16, 2011
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The Comex Exposed
From Dave In Denver, The Golden Truth

 just saw another "worse than 2008" post linked on  I don't know about anyone else, but I just don't find that commentary helpful.  That's old news.  It's no-value-added to comment on that. 

I was going to post on the ECB Long Term Refinancing Operation (LTRO) today and explain why it's just another "back door" QE operation, but I'm too busy to get into that at the moment.  I'll try to post something on it tomorrow.  I explained in a comment response under yesterday's post what the basics are. 

At any rate, celebrity hedge fund manager Kyle Bass has been commenting lately on the reasons to be diversifying heavily into physical gold and silver and why it is important to avoid using Comex futures contracts and ETFs for this purpose.  The bottom line is that they are derivatives of owning real gold, not valid substitutes.  In fact, they are fraudulent substitutes and we have seen from the MF Global abortion that even owning warehouse receipts entitling you to delivery of bars is no longer a valid claim on Comex gold.

Bass' firm apparently went to do an informal audit of the Comex:    The Comex had $80 billion of open interest vs. $2.7 billion of actual gold inventory. That means that actual gold at the Comex is less than 4% of the potential outstanding claims. It will only take one big delivery month 4% of the open interest decides to stand for delivery and the Comex is busted.  You'll see he also comments that the bars that were owned and supposedly allocated for Bass' firm were scattered all over the vaults.  This is bad. 

If this concept doesnt' horrify you, then carry on watching reality TV and worry about Kate Middleton's pregnancy. Those are the important topics anyway, right? Who cares about the fact that bankers and politicians are openly stealing your wealth.

Here's the video and it's well worth taking a 2-minute break from MTV to watch:


Buy Silver…Now!
By Matt Badiali, for The Daily Reckoning

Silver is an amazing metal…which is why it’s likely to soar over the coming years… 

You see, silver has more than 10,000 uses. It’s one of the world’s best conductors of heat and electricity. Inventors filed more patents on silver uses than any other precious metal in the world. And when silver is used for most industrial and technological purposes, it is used up forever… It simply costs too much to try to recycle the tiny bit of silver from every cell phone or casino chip.

I’m not saying industry is going to use up all the world’s silver. That simply can’t happen. But scarcity is a real issue.

Our rapid consumption of silver leaves very little to meet any uptick in demand from investors. A spike in interest will send prices spiraling higher…

Here’s a breakdown of the silver market. The table below shows the percentage of the total amount of silver consumed by each category over the past four years…

As you can see from the table above, only 12% of the silver supplied to the market made it to bullion in 2010. That means only a little more than 100 million ounces of silver became bullion for the entire investing world.

That’s a tiny fraction to sop up all the investment interest in the world.

Of that silver, about 43 million ounces went to exchange-traded funds like the iShares Silver Trust (SLV) and the Sprott Physical Silver Trust (PSLV).

That means you could buy all the extra silver bullion for about $2 billion. We could buy all the surplus silver bullion from the last four years for about $10 billion.

That’s the same as the market value of the iShares Silver Trust today. If you wanted to build another silver fund, you couldn’t. There just isn’t enough silver bullion out there to fill the order.

Even trying to amass that much physical silver would send the silver price soaring. It’s a simple market fact… When there is more demand than supply, it drives the price up.

And the economic problems confronting Europe and the United States have increased interest in precious metals… Silver gained a colossal 174% from August 2010 to April 2011.

In May 2011, however, the price collapsed 31% in just four weeks. The bull market simply ran up too far, too fast… and the decline wiped out many highly leveraged silver traders.

The big money is tiptoeing back into silver.

Last month, commodity trading advisors, pool operators, and hedge funds — the “big money” — weren’t interested in silver AT ALL…

But as they move back into the market, silver prices could soar. Let me show you what I’m talking about…

Jason Goepfert created SentimenTrader, a service that tracks investor sentiment toward various asset classes. According to Jason, silver just bounced off its most pessimistic reading in four years.

The so-called “commitment of non-commercial traders” hit 10,352. That’s incredibly low. The last time sentiment numbers were that low was in August 2007. Six months later, the price of silver was 59% higher. It rose from $12 per ounce to $19 per ounce.

I went all the way back to 2002 and found that silver sentiment bottomed near 10,000 six times… On average, the price of silver rose 33% in the next six months and 54% over the next year. This chart shows the last four times it bottomed…

Here’s how the silver price performed after each of the last four times silver sentiment bottomed out…

The best return came after Bottom No. 2, which coincided with the US banking/credit crisis. Silver soared an eye-popping 405%, including its parabolic rise in 2010.

As those numbers indicate, silver is one of the most volatile assets in the world. Over the last year, silver has seen massive price swings, including an 81% rally and two 30% drops. That forced many traders to liquidate their silver holdings in order to meet emergency short-term requirements. (Plus, the debacle at commodity broker MF Global has scared many folks out of the market.)

But the long-term drivers of gold and silver’s uptrends are still in place. Enormous and growing Asian economies like China and India are getting richer…and they have deep cultural affinities for precious metals. Plus, the Western world has lived way beyond its means for a long time…the debts and liabilities it has taken on can only be paid back with devalued, debased money. This is bullish for “real money” assets like gold and silver.

With sentiment so negative toward silver (and just beginning to turn back up), it’s a great time to take a position in this long-term bull market.

If gold and silver prices are nearly certain to rise over the next few years (and probably rise dramatically), the simplest way to play that trend is to buy bullion…real, hold-in-your-hand silver coins.

And I recommend everyone do just that… Buy some silver and store it away.

By: Jim Willie CB,

Divergence between paper gold and physical gold price is happening, the process begun. Actual physical shortages have kept the price up. The naked shorting of futures has kept the paper price down. The fraud cases and lawsuits, with no hint of prosecution, provide the levered force to create much wider divergence, as traders and entire firms depart the tainted crime scene that is the COMEX. Trust has vanished along with private accounts. At the center of the backdrop for the divergence, apart from the criminal events, is the economic deterioration and asset market downdraft. It leads to margin calls, loan payment obligations, fading investor confidence, negative sentiment, and a desire to avoid loss. Hence the huge liquidity concerns, selling of good assets that command a strong price, and central bank encouragement of gold sales even with lease. These forces conspire to push down the gold futures price from the discovery process, called the paper gold price. These forces, although real, are exaggerated by the Syndicate to explain all. On the other side is the desperation among central bankers to cover debt securities up for sale or rollover funding. They resort to utter hyper inflation by monetizing the many types of government bonds. They are obligated to aid their banker cohorts, and thus purchase truckloads of badly impaired sovereign bonds and other collateralized bonds. Over time these sovereign bonds have proved toxic. The compelling need to stimulate economies, to redeem toxic bonds, and to recapitalize and nationalize the big banks adds to the monetary inflation outcome. Therefore, two sides are in opposition in a battle to the death of one or the other. No middle ground can be achieved, not any longer. It is the quintessential battle between monetary hyper inflation and restoring bank system integrity to avert collapse. The insolvency has recently met illiquidity. The battle features strong forces on each side. The divergence between physical and paper gold price is widening.

The incurable speculator junkies committed to the addictive leveraged game rigged by the Forces of Evil seem stuck at the casino tables, where fingers are lost, finally entire hands and arms. If their practice was to purchase physical, they could benefit from the paper price swoon, and join the Forces of Good team, rather than fighting the evil side on their dominated turf. To be sure, many aware analysts in the news maintain a small gold position in COMEX that is rolled over constantly. Many have physical positions but keep with the paper trades as a hobby, better described as an addition to the juice. Leverage cuts both ways. Their continued activity has left them exposed to theft, while knowing the criminality was widespread within the arena. So many players and firms are departing the arena altogether like Ann Barnhardt of BCM Capital. The divergence between physical and paper gold price is widening.

The desperation of the bad team is growing. The gold cartel has benefited significantly from the fresh Libyan gold supply (144 metric tons) and Greek gold supply (111 metric tons), not to mention the ample Dollar Swap Facility. It is the bankers New Gold, as reported by intrepid Jeff Neilson. In a fresh sign of bankster desperation, the lease rates for gold have been pushed down to net negative levels. The fresh supply from the two broken nations has greatly aided the COMEX, providing new cannon fodder. Perhaps more wars to liberate the oppressed can be conjured up, to release more tyrant wealth. It is not a coincidence that negative gold lease rates came when Libyan gold was made available (heisted) and when Italian sovereign bonds went into critical DEFCON mode. The gold supply helped to aid the lack of bond demand. The gold lease story is analyzed more fully in the December Hat Trick Letter.

A preface is warranted. The paper Gold market is very different in its internal dynamics from the physical. The paper Gold market shows signs of inelasticity that borders on comical. Witness the low demand in 2001 and 2002 when Gold had a paper price tag at $300 or less per ounce. Witness nowadays the amplified selling when the paper price declines. The leverage from the corrupted paper mechanisms forces margin pressures and sales. The leveraged game goes opposite to the real world of price mechanisms. On the upside, global demand rises with a rising physical price, called the gold fever. The inelasticity on the supply side is prevalent in the paper market, while the inelasticity on the demand side is prevalent on the physical market. To confuse the mix, mining firms realize some inelasticity as price falls, they are stuck with a liquidity crunch on their forward sales ruin. A huge amount of money is required to cover their losses, urged on by Wall Street advisors. Their mining operations suffer from lack of funds, and projects are curtailed. The paradoxical differences in dynamics help to push the gap between the paper and physical Gold price. The incompatible forces work to rip apart the COMEX. The divergence between physical and paper gold price is widening.

The hypothecation battle will bring sufficient publicity to help the divergence along. As more assets are seen as committed, involved, and tainted in the process of grabbing, snatching, and securing collateral, even by illegal means, the physical assets will be removed from the system. Parties will remove accounts and metal from the COMEX in response from basic self-preservation. On the investment and speculation side, harm has been rendered to managed risk. The client funds have begun to flee. The protection and security of money in private accounts has been under siege in recent weeks since the MF Global crime scene was established and the yellow tape cordon has been put in place. Investors are pulling money out of hedge funds at a rapid rate. The COMEX will be increasingly isolated. Clients funds were redeemed to the tune of $9 billion in October, almost four times as much as they pulled in September, according to Barclay Hedge and TrimTabs Investment Research. Investors in October yanked more from hedge funds, setting a single month high over the last two years.

The redemptions are the largest for the hedge fund industry since July 2009, when $17.8 billion was returned. The Barclay Hedge office put lipstick on the corrupt pig by commenting on how investors have lost patience with lackluster investor returns. To be sure, the average hedge fund is down by about 4% this year. The global hedge fund industry size has been reduced to $1.66 trillion, still sizeable. It is always interesting, if not amusing, to read the spin from the isolated corners. Hedge funds are seeing capital depart for the simple reason of moving away from crime centers. In the process the COMEX is being isolated. With increased isolation comes the easily recognized fraud. Look for some major stories soon about the raids to the GLD and SLV inventories by their custodians engaged in naked shorting. The Exchange Traded Fund fraud story is analyzed more fully in the December Hat Trick Letter. The divergence between physical and paper gold price is widening.

Grand divergence dynamics are becoming clear. Ann Barnhardt explained in detail how the COMEX will go away. It will not default, but rather fall into irrelevance. She laid it out in credible detailed form with numerous factors coming to play. The COMEX might still suffer the shame and spotlight of criminal prosecution. It will more certainly suffer from being ignored and shunned. The physical basis market will not respond to the declines in the paper futures market. The current dominant market will go away due to lost integrity and eroded trust. The consequences and implications of the recent major scandal and coverup are enormous, staggering, and sweeping. The changes from the MF Global failure and theft of private segregated accounts will come in time, perhaps accelerated by another similar event to slam the message home. The Syndicate has turned desperate, resorting to theft in the open daylight, which has resulted in direct consequences. Hundreds of COMEX clients waited in line for delivery of gold, and had their wallets stolen by JPMorgan. Their Gold & Silver set for delivery found its way into JPMorgan accounts at the COMEX. The details of the missing silver then reappearing silver is discussed in the December Hat Trick Letter. The slow mentally overlook this fact. The alert who point to fraud consider it a smoking gun. On its face, evidence mounts that JPMorgan simply converted 614k ounces of MF Global client silver into JPM licensed vaults. Big hats off to the Silver Doctors for excellent financial fraud forensic analysis. Do not expect prosecution over the crime, for MF Global, for JPMorgan, or for the accomplices in London, not even Jon Corzine. The Fascist Business Model in the Untied States does not permit prosecution. The bigger the crime, the more likely the perpetrator is in control of the government high offices, the financial ministry, the printing press, or the regulators.

Ann Barnhardt explained how the COMEX will fade away into oblivion. Its final chapter will be marred by a grand price divergence, where the futures market price declines from shunned avoidance, while the cash physical market price holds steady then rises. Many including the Jackass had thought that a slew of delivery demands would force a drain in their gold & silver inventory, eventually leading to a slew of lawsuits, together to shut them down as a corrupt enterprise arena. The MF Global theft reveals the alternative route that seems more clear. The gold cartel led by JPMorgan and secretly by the USFed will not go quietly. They have resorted to theft of private accounts on the open stage. The money is not missing. That is the lie. It is held in JPMorgan accounts in London, where fraud laws are more relaxed. We have seen this Madoff movie before, but it will be shown on the silver screen again. The divergence between physical and paper gold price is widening.

The backlash has begun and will gain strength. Barnhardt offered many cogent arguments with detail on how the COMEX will be ignored from distrust and suspicion of further thefts, as clients remove funds and close accounts. Here are her main points. They apply to Gold & Silver. She has the Barnhardt weblog:

  • Arbitrage is set to kick in. Players will buy at the cheaper corrupt paper market in COMEX and sell in the higher honest physical market, wherever brokers can match to make deals. (It is the same phenomenon that ripped the Euro sovereign bond market apart, as the German Govt Bond yields remained much lower than the Spanish and Greek.) They will take advantage of a strong basis, buy at the discount offered by COMEX, and sell into the cash spot physical market.
  • A linchpin holds the market together. Keeping the futures markets tied to the underlying cash physical market is the fact that the futures contracts permit taking delivery. That delivery mechanism just broke as linchpin in full view. The futures market has lost viability and trustworthiness because of the MFG collapse and theft.
  • The entire delivery mechanism has been corrupted and undermined. Taking delivery has meant a holding of physical metal bars is stored in a certified vault with your name attached. No longer are such holdings considered safe. Thefts occurred, and lawsuits have occurred to decided upon ownership of bars in dispute.
  • The de-coupling process comes when arbitrageurs finally lose all confidence in market interaction dynamics, as the cash market will lose connection on price from the futures market. Players will not be willing to take the risk of having their money, positions, and physical metals stolen or confiscated.
  • As players flee the futures market, the paper futures prices will decline. The cash physical market will hold steady. The divergence will come and be noticed, then be widely publicized. The players will realize that the physical market is the only remaining game to be played with honest rules in effect. The cash dealers will ignore the futures prices, no longer a valid price discovery, seeing that market demand for their physical inventory is robust, and maintain their prices steady. Later, they will even raise the physical prices. Then later still, the parabolic spike comes for physical Gold & Silver.

Asset management funds are appealing to mining firms for direct metal supply. They are bypassing the COMEX in a new trend. It is a natural development, as miners seek a fair price and the funds seek a reliable supply. The COMEX is cut out of the process. The Sprott Funds have revealed how they sourced their precious metal from mining firms last year. The official exchanges are being cut off, a form of isolation as a result. The divergence between physical and paper gold price is widening.

See the Ashanti story as typical. The COMEX is seeing reduced supply lines, reduced operations, more criminal implications, horrible publicity, and fewer clients. Criminal fraud does that, as lawsuits will follow like cold rain. The trend shapes up well for higher gold & silver prices. Mark Cutifani is CEO of AngloGold Ashanti, a $16 billion mining firm. He said, "Major [asset management fund] buyers are finding it is hard to get physical gold. People are coming directly to us [for large gold purchases,] people who want tonnes of physical gold, people with serious financial muscle, because they are finding it is very difficult to secure the volume of gold they want. That is something we have noticed over the last 18 months, and it has been increasing in the last six months. People are finding its hard to get physical gold." The clear message is that the COMEX has no spare available metal at all. Cutifani has good insights into the commodities and precious metals markets, and describes a fascination new trend regarding the global picture. He pointed out that major gold buyers are emerging from the Middle East and Asia. See the Bull Market Thinking article (CLICK HERE).

New gold centers are forming, where the safety is most assured. Hong kong and Dubai have emerged as reliable honest brokers, and will continue to provide valid safe haven. Switzerland, London, and other locations are fading fast. They are the corrupt centers where fascism has become prevalent, laced through the financial system.Takahiro Morita, the Japan director of the World Gold Council, reported that Japan's gold exports in the 10 months ended October totaled 95.6 metric tonnes, their highest level since 2008, when it registered at 95.5 metric tonnes. People who bought gold and jewelry in the 1980 and 1990 decades are selling back what they purchased, according to precious metals traders. Japan has turned into a big exporter. Contrast to the official side. Central bank purchases have risen by 114% over the previous quarter. Purchases by central banks could hit 450 metric tonnes this year, concludes the investment research at the council. The volume represents the highest level of central bank buying since at least 1970, perhaps the greatest in recent history. A veteran gold trader with actual experience in these locations pitched in to explain. He said, "These are not sales in Japan. They are exports, an important distinction. Many investors are busily relocating their precious metal bullion to Hong Kong and Dubai UAE. Look for Dubai to be the HK of the Middle East. The Chinese have made that decision, and it is being implemented with lightning speed." Most of the relocation from Japan shows up as exports, which require payments.

October imports into China from Hong Kong rose 50% over September, and up 40-fold from last year. The more attractive fair price paid in Shanghai reached $50 above the corrupt controlled London price. The arbitrage has been very active. Chinese gold imports from Hong Kong hit a record. The Financial Times reported Chinese gold imports from Hong Kong hit a record high in October and astoundingly, they accounted for more than one quarter of the entire global demand. Data showed that China imported 85.7 tonnes of gold from Hong Kong in October, up 50% from the previous month and up more than 40 times from October of last year. It marks the fourth consecutive month that China's gold flows from Hong Kong have hit new highs. The article noted that the price arbitrage between London and Shanghai was favorable for Chinese imports during late September and early October, giving astute clever traders an edge. Gold on the Shanghai Exchange traded up to $50 per ounce above the main global market based in London, a record price difference. Purchases from China have fallen since October, as the recent strength in the USDollar has made gold more expensive. Also, considerable new strain has been felt inside China in recent weeks. Conclude that price arbitrage has begun to show itself across international boundaries. The divergence between physical and paper gold price is widening.

No gold chart will be shown in this article, out of disrespect deserved for the COMEX criminal activity. A story was recounted in recent days from my best source of solid reliable gold information. The aware gold community has overlooked a phenomenon that might be more profound in action here and now. A major squeeze is on that capitalizes on the artificially low COMEX price and the higher honest physical price. The Barnhardt effect can be seen, or at least recounted. A gold trader informed that some multi-$billion purchase Gold orders have been in the process of filling at or near the $1600 price per ounce. The price must remain near $1600 to complete the orders and permit them to clear. Call it Agent2000 who seeks the massive amount of Gold, one of the Good Guyz. The name fits since their goal is to force the Gold price back over $2000/oz after the sale transaction clears. Since so large, the orders take time to fill completely. The low-ball buy orders have been filling for over two weeks. At the same time, the Agent2000 buyer has enlisted the aid of numerous assistants to push down the paper Gold price by putting extreme pressure on some bad players, some nasty types from the usual list of suspects in the Western banking sector. These bankers are being squeezed out of their gold, as they contend with deep insolvency, reserves requirements, falling sovereign bond values, depositors exiting, and more. They are players in what has been widely called the Gold Cartel. The Jackass term has been applied in a wider sense, as they have been part of the Syndicate that reaches into the Wall Street banks, the defense contractors, news media, and big pharma.

The other side of Agent2000 is where additional intrigue lies. He (they) have buyers lined up on the physical side some deals ready to close at $1900 per ounce. Later the price will push over the $2000 mark. The buyers are ready. One must infer that the buyers have a great deal of money ready to devote to the battle. Maybe some is piled up to escape the clutches of the cartel, removed from the system. Maybe some is piled up at a major new slush fund to do battle with the cartel at their own game. Maybe some is piled up and kept out of sight from greedy hands in government officials, like off-shore in the Caribbean or sequestered in the Persian Gulf. This story might be perplexing to many in the gold community since the Good Guyz are pushing down the Gold price in order to facilitate a gigantic order that will work toward crushing the cartel by draining their gold. Their gold cannot be drained without the completion of a great many orders. It is only natural to attempt to achieve the lowest possible price. If the gold cartel insists on pushing the price down, then they open the door for major volume sales at the artificially low and very much bargain price. It is happening, but the gold community does not enjoy the symptoms of the process.

So a huge huge huge buyer of gold is busy, and a multi-$billion order is working through. The buyer demands a $1600 price, while on the other side of the table Agent2000 has a sale lined up for the same metal at a $1900 price on physical. The trade will take gold bullion from the Bad Boyz hands and put it into the Good Guyz hands. In the process, the COMEX supply lines will be drained more. This is consistent with mining firms removing supply lines to the COMEX. The Agent2000 buyer is pushing price down, squeezing some evil parties hard, crushing testicalia along the way. He (they) describe to the distressed seller at $1600 that pressures will continue until the deal is closed. The seller is in tremendous pain with open distress showing. So many assume the Bad Powerz are pushing down the Gold price. Not so!! This event and transaction displays how some pain comes in many isolated cases of Good Guyz pushing the Gold price down to empty the Bad Powerz vaults. My source would not reveal the identity of Agent2000 or the location of the squeeze. It seemed like London. The money is not exclusively coming from China. Word has it that Russia is also applying the pressure, with some Chinese teamwork. The Competing Currency War has a new major flank. The divergence between physical and paper gold price is widening.

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Jim Willie CB, editor of the “HAT TRICK LETTER”




Tuesday, December 20, 2011

The Reasons To Own Both Silver And Gold Continue To Accelerate

Morgan Stanley Deconstructs The Funding Crisis At The Heart Of The Recent Gold Sell Off, And Why The Gold Surge Can Resume
From ZeroHedge

A week ago, we touched upon the likelihood that the recent gold sell-off was driven primarily due to a quirk in liquidity provisioning in which gold plays a key role via its "forward lease rates", or the Libor-GOFO differential. Specifically, in "As Negative Gold Lease Rates Collapse, The Gold Sell Off Is Likely Coming To An End" we said, "In a nutshell, negative lease rates mean one has to pay for the "privilege" of lending out one's gold as collateral - a prima facie collateral crunch. The lower the lease rate, the greater the use of gold as a source of liquidity - and since the indicator is public - it is all too easy for entities that do have liquidity to game the spread and force sell offs by those who are telegraphing they are in dire straits and will sell their gold at any price if forced, to prevent a liquidity collapse." Said otherwise, the lower lease rates drop, and they recently hit a record low for the 3M varietal, the likelier it is that gold may see substantial moves lower. Today, Morgan Stanley's Peter Richardson recaps precisely what was said here, in a note titled "Recent fall in gold prices points to bank funding costs." Granted, MS only looks at the first part of the equation - the dropping lease rates, and ignores the re-normalization in gold, aka the tightening in lease rates. Well, with the 3M forward lease rate now almost back to unchanged, it appears our speculation that the gold sell off, with spot at $1575 on the 15th, is over were correct, and gold is now $40 higher, and just below the critical 200 DMA that everyone saw as the catalyst of gold going to $0. So what does MS have to add to our analysis? Well, much more optimism for one, because not only does the bank think we are right that the collapse in negative lease rates (i,e., the flattening to practically unchanged) mean the sell off is over, but such a normalization of the gold lease market has "the makings of a renewed upward assault on the recent all-time high.... Our current gold price forecast for 2012 of US$2,200/oz remains in place under these circumstances." Qed.
The key highlight of Morgan Stanley's hypothesis of what negative gold lease rates imply for gold:
Firstly, we think negative lease rates are highlighting a sharp increase in the demand for gold as collateral for US dollar loans at a time of reduced liquidity in the traditional US dollar interbank funding market. The more negative the lease rates the higher the cost of funding using gold as security.
Secondly, access to this collateral on a scale indicated by the rise in GOFO can only emerge if the providers of liquidity to the leasing market are prepared to increase the stock of lent gold in circulation. This development points to the central banks, the largest custodians of above-ground stocks and the traditional providers of liquidity to the gold-leasing market. Aware of acute funding pressures in the traditional interbank market, it seems increasingly likely to us that central banks have increased the quantum of gold available for use in a non-traditional funding market, at least until the measures to alleviate bank-funding stress in the US dollar swaps market have been successful. The recent easing in the scale of negative gold lease rates, suggests that demand for this source of short-term funding might be easing, but has not disappeared, even after the raft of measures announced by the ECB and the earlier coordinated intervention by the six central banks.
Said otherwise: we likely have smooth sailing for now, as banks will not proceed to cannibalize each other for a bit. But keep a very close eye on on that LIBOR-GOFO spread: the second it collapses, it may be time to step away from the market…


London Trader - We are Witnessing a Historic Bottom in Gold
From Eric King

With many investors worried the price of gold could head lower, today King World News interviewed the “London Trader” to get his take on the gold market. The source stated, “The Chinese have continued to take delivery of both physical gold and silver directly from the ETF’s GLD and SLV.  They are also going directly to producers.  Entities are bypassing the COMEX altogether and going straight to gold mining companies.  Every single month producers have a certain amount of gold and silver they sell.  Normally they sell it to the bullion banks and the bullion banks, of course, leverage this gold and sell up to 100 times that in paper markets to control prices.

The London Trader continues:

“They (bullion banks) hold that little bit of physical gold and claim they are backed up on their position to the CFTC.  I have all my large buyers now going to producers and saying to them, ‘Look, don’t sell it to the bullion banks, we’ll buy it from you.’  So we are buying directly from the producers and this includes some sovereign entities which are doing the same thing. 

We’re struggling to get the physical out of these guys (producers) because they have so many people banging on their door, saying, ‘Sell it to us direct.’  What these buyers are doing is essentially taking gold out of the system, which means the bullion banks can’t leverage that gold anymore.

So this is a huge, dynamic shift that wasn’t there before.  Now we are working on one other thing.  We’re beginning to offer them forward contracts.  If you are a sovereign entity, what you are saying to these producers, especially on new projects, is, ‘Why don’t you sell the gold to me in 12 months?  Here’s the cash, just provide it to me 12 months from now.’ 

These buyers are now cutting off future gold supply from the bullion banks....  

“This is a huge, tectonic shift in price dynamics going forward because it is taking price discovery away from the bullion banks.  These large Chinese buyers and sovereign entities which are doing this are going to have a massive impact on the market.

Interestingly, so many people are bearish on gold right now and looking for a collapse in the price of gold.  They don’t understand what is happening in the physical market.  The bullish fundamentals I just described to you have enormous implications. 

We are making a historic bottom right now.  The paper gold, or virtual gold market, has diverged so far from the physical market that it’s no longer a credible marketplace.  That’s the key thing that came out of a very important meeting I was in yesterday where we had some serious players.  The people I was meeting with are all on the buy side and have been since the lows last week.

There are massive physical orders, sitting, waiting for any more discounts, and yet everyone else seems to be short.  So you have huge fuel for a rally here. 

You have to keep in mind this recent plunge was orchestrated with borrowed gold and that borrowed gold is now gone.  That’s why gold can’t go much lower.  Any dips in price will be aggressively purchased.  As I said earlier, right now we are witnessing a historic bottom.”

The London Trader previously told KWN on October 21st that China had purchased a massive amount of physical gold at the lows of the October 20th session.  That marked the dead low for the price of gold in October and gold rallied roughly 10% in the following 8 trading sessions.


DJ US Nov Housing Starts Surge 9.3%
Tue Dec 20 08:30:23 2011 EST WASHINGTON (Dow Jones)--U.S. home building surged to the highest level in 19 months during November and construction permits grew, encouraging signs for a part of the economy struggling to get back on its feet.

Home construction last month increased 9.3% to a seasonally adjusted annual rate of 685,000 from October, the Commerce Department said Tuesday. The results were better than forecast. Economists surveyed by Dow Jones Newswires expected housing starts would rise by 0.3% to an annual rate of 630,000.

The increase in November was driven by a 25.3% increase in multi-family homes with at least two units, a volatile part of the market. Construction of single-family homes, which made up about 65% percent of the market, rose only 2.3%.

From Dave in Denver, The Golden Truth

After an 8 month price correction that has been mistakenly taken to be a new bear market by those who are clueless, like Dennis Gartman, it appears that the gold bull is kicking at the gate:
Interestingly, so many people are bearish on gold right now and looking for a collapse in the price of gold.  They don’t understand what is happening in the physical market.  The bullish fundamentals I just described to you have enormous implications  -  London bullion trader
Here's the short interview which is the source of that quote:  LINK  It is a must-read and the report of large "entities" going directly to gold producers in order to source large quantities of bullion is consistent with other industry insider accounts of this.  I linked one a couple weeks ago.

"Interesting" from my viewpoint because I have pointed to some indicators that likely signal that we are near or at a bottom and that the next extended move higher in gold will likely take us to a new record nominal high in gold. 

One of these signals as discussed yesterday is gold breaking its 200 dma to the downside.  Currently the 200 dma is around $1618 using the Comex continuous futures contract (this would correlate to around $1615 on a spot price basis).

Another signal would be the current long/short Commitment of Traders (COT) structure of the hedge funds (large specs) and the big banks (commercials).  For the duration of the gold bull market, market bottoms have been associated with a low relative net long position being taken by the large specs and a low relative net short position being taken by the price manipulating bullion banks.  That this is the case is indisputable.  Currently the large specs have a very low net long position and the banks have low net short position.  I rehypothecated Ted Butler's latest remark on the COT structure from Ed Steer's Gold & Silver Daily: 
I think the gold COT structure is back to a bullish set up, especially if the improvements after the cut-off are what I think them to be. As such, gold may also be at a price bottom, especially considering the bullish signals (or lack of bearish signals) coming from the gold physical market (ETF holdings, etc.). But to be fair, while gold is near bullish COT readings over the past year or so, on a much longer historical basis there may still be room for further liquidation. My personal sense is that we probably shouldn’t see big further speculative long liquidation in gold and may, in fact, be good to go to the upside. But if the COT structure in gold is bullish (as I think), then silver’s structure is screamingly, super-duper bullish.
Combined, the 200 dma plus the COT signals are quite bullish for gold.

One indicator that I have not seen commentary on is the COT set-up in the euro, and tautologically, the inverse set-up in the dollar.  Currently, the large spec hedge funds are record short the euro, which means they also are very long the dollar vs. the euro.  Conversely, the big banks are primarily the entities which would take the other side of the hedge fund bet, meaning the big banks are very long the euro and very short the dollar.  This is very very bullish for gold. 

Take a look at this chart rehypothecated from

(click on chart to enlarge)
The green line that goes below zero starting in May is the short position of the large specs.  You can see how the hedge fund position has shifted from long to short this year.  The red line is the long position of the big banks.  Why would the euro begin to move higher again rather than collapse, like everyone seems to think will happen?  Because I have said all along that I wouldn't be surprised if the EU figures out a way to save itself from extinction.  Hell the U.S. is already printing money to bail out Europe via the up to $1 trillion currency swap facility arranged by the Fed.  This is a de facto QE because it increases the size of the Fed balance sheet until the swap unwinds, if it ever does.  This is printing and this dollar bearish.  Just wait until the Fed has to start printing to fund 2012 Government spending programs...Don't forget, what's bearish for the dollar is bullish for gold...

Wednesday, December 7, 2011

Will A Euro Short Squeeze Launch Gold And Silver Higher?

Net EUR Short Position Soars To All Time Record, Implies "Fair Value" Of EURUSD Below 1.20, Or Epic Short Squeeze
From ZeroHedge

It was only a matter of time before the bearish sentiment in the European currency surpassed the previous record of -113,890 net non-commercial short contracts. Sure enough, the CFTC's COT report just announced that EUR shorts just soared by over 20% in the week ended December 13 to -116,457. This is an all time record, which means that speculators have never been more bearish on the European currency. Yet, the last time we hit this level, the EURUSD was below 1.20. Now we are over 1.30. In other words, the fair value of the EURUSD is about 1000 pips lower, and has been kept artificially high only due to massive repatriation of USD-denominated assets by French banks (as can be seen in the weekly update in custodial Treasury holdings, which just dropped by another $21 billion after a drop of $13 billion the week before). This means that the spec onslaught will sooner or later destroy the Maginot line of the French banks, leading to a waterfall collapse in the EURUSD, which due to another record high in implied correlation will send everything plunging, or if somehow there is a bazooka settlement, one which may well include the dilution of European paper, the shock and awe as shorts rush to cover will more than offset the natural drop in the EUR, potentially sending it as high as the previous cycle high of 1.50. If only briefly.

Fed May Inject Over $1 Trillion To Bail Out Europe
From ZeroHedge

As first reported here, two weeks ago European banks saw the amount of USD-loans from the Fed, via the ECB's revised swap line, surge to over $50 billion - a total first hit in the aftermath of the Bear Stearns failure prompting us to ask "When is Lehman coming?" However, according to little noted prepared remarks by Anthony Sanders in his Friday testimony to the Congress Oversight Committee, "What the Euro Crisis Means for Taxpayers and the U.S. Economy, Pt. 1", we may have been optimistic, because the end result will be not when is Lehman coming, but when are the next two Lehmans coming, as according to Sanders, the relaunch of the Fed's swaps program may "get to the $1 trillion level, or perhaps even higher." As a reference, FX swap line usage peaked at $583 billion in the Lehman aftermath (see chart). Needless to say, this estimate is rather ironic because as Bloomberg's Bradely Keoun reports, "Fed Chairman Ben S.

Bernanke yesterday told a closed-door gathering of Republican senators that the Fed won’t provide more aid to European banks beyond the swap lines and the discount window -- another Fed program that provides emergency funds to U.S. banks, including U.S. branches of foreign banks." Well, between a trillion plus in FX swap lines, and a surge in discount window usage which only Zero Hedge has noted so far, there really is nothing else that the Fed can possibly do, as these actions along amount to a QE equivalent liquidity injection, only denominated in US Dollars. Aside of course to shower Europe with dollars from the ChairsatanCopter. Then again, before this is all over, we are certain that paradollardop will be part of the vernacular.

Historical ECB swap line usage with the Fed, and projected assuming $1+ trillion in use. Just to put it all into perspective.

For all those lamenting the ECB's lack of willingness to print, fear not: the almighty Chairsatan has vowed to valiantly take his place when needed. As in 2 weeks ago. From Bloomberg:
European financial companies led by Royal Bank of Scotland Plc were borrowing about $538 billion directly from the Fed when the central bank’s emergency loans to all banks peaked at $1.2 trillion on December 2008, according to a Bloomberg News examination of data released by the Fed under last year’s Dodd- Frank Act and earlier this year under court-upheld Freedom of Information Act requests.

The Fed hasn’t provided any estimates of how large the swap lines might get, said David Skidmore, a Fed spokesman. He declined to elaborate.

“To get above $600 billion wouldn’t be a stretch,” said Desmond Lachman, a former International Monetary Fund deputy director who’s now a resident fellow at the American Enterprise Institute, a conservative public-policy center in Washington. “You’re talking about a European banking system that is huge in relation to that of the United States.”

Josh Rosner, a banking analyst with New York-based Graham Fisher & Co., said the Fed’s swap lines may end up helping Europe support banks that might not deserve emergency loans.

“As a result of this commitment of financial support, we’re now supporting undemocratic approaches implemented largely by authorities who have demonstrated an ongoing inability to either recognize the scope and scale of the problems or come to a consensus on the proper approach,” Rosner said.

The ultimate size of the swap lines is “unknowable at this point,” he said.
For those wondering what all this means, we remind you that there was a roughly $6.5 trillion synthetic (duration mismatch) USD short as of 4 years ago, as we reported at the time. That short has gotten substantially larger following a 4 year regime of the USD as a funding currency courtesy of ZIRP. Which means that any time the liquidity shortage threatens to collapse the system, the first thing to go stratospheric will be the USD as the global financial system scrambles to cover its short. It also means that anything the Fe and/or ECB can do from a pure printing standpoint will be peanuts compared to the utter carnage unless the dollar short is not preserved. Which naturally means that it is up to the Fed to continue drowning the world in either nominal dollars, or swapped ones, such as under the form of a USD-EUR swap, which is nothing but a forward operations. In essence, with the FX swap lines, the Fed engages in the ultimate currency warfare tool: it sells dollars to the entities most needy. And it does so, because if it doesn't, said needy entities will implode, and the hollow financial dominoes will topple, leading to a mess that not even infinite synthetic or real printing of binary of paper dollars, euros, or anything else will do to fix.

Which is why all those wondering if gold should be bought now or the second after the ECB starts printing, we have one piece of advice: just look at the chart above. It says all one needs to know.

Jim Rickards - This Will Send the Price of Gold to the Moon
From Eric King

With investors concerned about the recent plunge in gold and silver and continued uncertainty regarding the European situation, today King World News has released part II of the eagerly anticipated interview with KWN resident expert Jim Rickards.  KWN expert, Rickards, has gained international recognition for his deadly accurate predictions regarding moves by central planners.   Here is a small portion of what Rickards had to say about gold, QE3 and more:  “Well, you see the Treasury shorting the dollar in the form of taking SDR notes.  You see printing in order to get the dollar back down against the euro.  You see more printing to break the peg if China chooses to repeg, which I believe they will.  And, of course, the IMF has its own printing press to print SDRs.”

Jim Rickards continues:

“By the way the European Central Bank will start printing as soon as they see deflation, which we can expect in the first quarter based on the fact that Europe seems to be slipping back into a recession.  So with printing from the ECB, printing from the Fed, printing from the IMF, the Treasury shorting the dollar and the currency wars in full swing, how can this mean anything other than the price of gold going up a lot.

So it looks like we are going to get flooded with dollars.  One other thing I would add to that, which I think is extremely bullish for the price of gold, I’ve been talking about QE3, but there is something even more insidious than that which we may see.  It’s called NGDP targeting. 

NGDP stands for Notional Gross Domestic Product.  Targeting just means that the Fed is going to pick a target for growth in NGDP and then print as much as it takes to hit that target.

Now notional GDP is not the same as real GDP.  In other words, notional GDP is real GDP plus inflation.  If the Fed targets NGDP, what they are really saying is they don’t care about inflation anymore, they’ve given up.  I’ve said all along the Fed wants inflation and this is a way of getting it.  It’s also a way of destroying the debt by cheapening the dollar.

...Targeting notional GDP, it’s just a fancy way of saying printing or QE forever.  I’m using the phrase QE3 to mean more printing, but I actually think what the Fed is going to do is target NGDP....  

“That means no limits, no time limit, no quantity limit, just a target.  And since real growth is not great, the target is going to be mostly comprised of inflation.  That’s going to send the price of gold to the moon.” 

In part I of Rickards blockbuster KWN interview he let King World News listeners globally know what would trigger QE3: “I was one of the ones going back to March of 2011 saying that QE3 was not coming in the summer.  When QE2 was over in June, a lot of voices were saying things are desperate, the Fed’s got to print, they’ve got to monetize the debt and you are going to see QE3.  I said no you are not going to see it and that turned out to be the case. 

But here we are six months later and what I’ve said is that the key to QE3 is not economic conditions in the United States, it’s the cross rates.  Look at the euro/dollar cross rate and look at the Chinese Yuan cross rate and that’s your green light (for QE3).

It’s a little bit of an estimate, but to me the key level is 1.30 (on the euro).  With the euro 1.30 or higher, that is going to accomplish the Fed’s purpose of a cheap dollar, so we will not see QE3.

But now that the euro has breached 1.30 and if you see it at that level or going lower, 1.28, 1.27, trading in there, then you are going to see QE3.  That’s going to cheapen the dollar and get the euro back up again.  So, yes, it (the euro) has traded down, but I view that as a temporary phenomena and something that is going to be a trigger for QE3 from the Fed.

As for Europe, they will get this done over the next couple of months.  There has been a lot of talk asking why doesn’t the ECB monetize the debt?  That’s not their job, but they will print money when the time comes.  The signal for that is deflation.  You’ve got to see deflation in Europe in the price indices and that’s the signal for the ECB to print.”

In part II of his King World News interview, Rickards has more to say about exactly what the central planners are up to and how it will impact the gold market as well as global markets.  Part II of the KWN Jim Rickards interview is available now and you can listen to it by CLICKING HERE. 

Jim Rickards’ new book Currency Wars: The Making of the Next Global Crisis has just officially launched and has made the New York Times Best Seller list for the second week in a row!  Make sure to order your copy today! 

Beware the Coming Bailouts of Europe
Ron Paul
Tuesday, December 20, 2011

The economic establishment in this country has come to the conclusion that it is not a matter of “if” the United States must intervene in the bailout of the euro, but simply a question of “when” and “how”. Newspaper articles and editorials are full of assertions that the breakup of the euro would result in a worldwide depression, and that economic assistance to Europe is the only way to stave off this calamity. These assertions are yet again more scare-mongering, just as we witnessed during the depths of the 2008 financial crisis. After just a decade of the euro, people have forgotten that Europe functioned for centuries without a common currency.

The real cause of economic depression is loose monetary policy: the creation of money and credit out of thin air and the monetization of government debt by a central bank. This inflationary monetary policy is the cause of every boom and bust, yet it is precisely what political and economic elites both in Europe and the United States are prescribing as a resolution for the present crisis. The drastic next step being discussed is a multi-trillion dollar bailout of Europe by the European Central Bank, aided by the IMF and the Federal Reserve.

The euro was built on an unstable foundation. Its creators attempted to establish a dollar-like currency for Europe, while forgetting that it took nearly two centuries for the dollar to devolve from a defined unit of silver to a completely unbacked fiat currency note. The euro had no such history and from the outset was a purely fiat system, thus it is not surprising to followers of Austrian economics that it barely survived a decade and is now completely collapsing. Europe’s economic depression is the result of the euro’s very structure, a fiat money system that allowed member governments to spend themselves into oblivion and expect that someone else would pick up the tab.

A bailout of European banks by the European Central Bank and the Federal Reserve will exacerbate the crisis rather than alleviate it. What is needed is for bad debts to be liquidated. Banks that invested in sovereign debt need to take their losses rather than socializing those losses and prolonging the process of adjusting their balance sheets to reflect reality. If this was done, the correction would be painful, but quick, like tearing off a large band-aid, but this is necessary to get back on solid economic footing. Until the correction takes place there can be no recovery. Bailing out profligate European governments will only ensure that no correction will take place.

A multi-trillion dollar European aid package cannot be undertaken by Europe alone, and will require IMF and Federal Reserve involvement. The Federal Reserve already has pumped trillions of dollars into the US economy with nothing to show for it. Just considering Fed involvement in Europe is ludicrous. The US economy is in horrible shape precisely because of too much government debt and too much money creation and the European economy is destined to flounder for the same reasons. We have an unsustainable amount of debt here at home; it is hardly fair to US taxpayers to take on Europe’s debt as well. That will only ensure an accelerated erosion of the dollar and a lower standard of living for all Americans.

Originally appeared at

Oblivious Because of Mainstream Media
By Greg Hunter’s

I think most people are simply oblivious to the enormous dangers the world economy faces. Oh, I think we will all get through Christmas and New Years without a meltdown, but all bets are off in 2012. A new acquaintance of mine told me last Friday, “Isn’t the economy getting better?” I just looked at her and shook my head in the negative. Then she said, “I guess if it was getting bad, the media wouldn’t tell us the truth.” I shook my head in the affirmative. My new friend is 75 years old and gets a Social Security check every month. She’s pretty sharp, but I don’t blame her for being misinformed. She gets her news the old fashioned way—from the mainstream media (MSM).

There is no wonder so many are in the dark and completely unprepared for the next crash. The front page of USA TODAY, last week, touted a headline that read: “Are We There Yet?” The article said, “The economic signs are encouraging, but we’re a long way from a comeback.” It covered recent upticks in auto and home sales. It also said the unemployment rate recently fell to “8.6%.” The USA TODAY story went on to say, “Although the decline was partly due to a 315,000 drop in the labor force as discouraged job seekers simply gave up, employment is up an average 321,000 a month since August, according to the Labor Department’s household survey. Most encouraging: Much of the hiring appears to be by small businesses, which typically fuel job growth in a recovery.” Wow, the fact that 315,000 people “simply gave up” seemed completely glossed over. Why did more than 300,000 people give up? Maybe it’s because there are precious few jobs. And what about the 400,000 people every week filing unemployment claims? Never let the facts get in the way of positive spin to please the advertisers. The USA TODAY story closes with a business professor who said, “I have a lot of confidence in the future.” (Click here for the complete USA TODAY story.)

I am happy for him, but for a little balance and more accurate reporting, maybe the newspaper could have also quoted an economist who wasn’t so optimistic? John Williams of can provide that balance. In his latest report, Williams calls the recent unemployment numbers “nonsensical hype,” and “. . . help-wanted advertising has been in monthly decline since May of this year.” The report goes on to say, “November retail sales and industrial production both showed renewed faltering in the U.S. economy, reflecting the impact of the structural impairment of consumer liquidity. Although the headline CPI inflation number was flat for November, underlying detail showed the still spreading impact of high oil prices. Inflationary pressures continue to be from Federal Reserve polices, not from strong economic activity. As the Fed increasingly is pushed to support the banking system, the central bank’s actions should accelerate the pace of U.S. dollar debasement, as well as the pace of rising U.S. inflation and precious metals prices.” (Click here for the home page.) Inflation, by the way, is running at 11% annually. (According to Williams, that would be the true inflation rate if it were calculated the way Bureau of Labor Statistics did it in 1980 or earlier.)

The economy is so weak, the Fed is going to be “pushed to support the banking system!” That means the Fed will print money to continue bailing out the banks, and not just the banks here, but overseas as well. The Fed recently opened up a new round of bailouts for European banks with what are called dollar swaps. The head of the International Monetary Fund (IMF), Christine Lagarde, warned last week of the global damage that could happen if the sovereign debt crisis in the Eurozone spun out of control. reported, “There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating.” (Click here for the story.)

One escalation could be the long rumored credit rating cut of French sovereign debt. The Guardian UK reported over the weekend, “France could be stripped of its triple-A credit rating before Christmas, raising new doubts about the survival of the euro, analysts have predicted. Standard & Poor’s – one of the three top rating agencies – is expected to cut France’s rating within days, in a move that would weaken its ability to raise funds on financial markets.” (Click here for the Guardian UK story.) A rating cut to Europe’s second largest economy is not a sign of a turnaround—quite the opposite.

Finally, the USA TODAY story mentioned housing making a significant comeback next year. The story said, “After adding virtually nothing to — or subtracting from — economic growth in recent years, “You’re talking about housing finally being a meaningful contributor to the overall economy” in 2012, Mesirow Financial’s (Diane) Swonk says.” I guess the editors didn’t think it was important to mention the gigantic ongoing foreclosure crisis in the U.S. On the same day as the USA TODAY story was published, CNBC reported, “Despite a seasonal slowdown in overall foreclosure activity, and a process still bogged down and backed up by the “robo-signing” processing scandal, the U.S real estate market is about to be hit by another surge of bank repossessions, according to a new report from the online foreclosure sale site RealtyTrac. As banks resubmit millions of documents and courts begin hearing cases again, the backlog of over four million delinquent loans will start surging through the pipeline again.” (Click here for the complete CNBC story.) What effect will these foreclosures have on home prices and retail sales? I’ll bet it will not be positive for new home sales.

Listen, there is nothing wrong with putting positive facts or quotes in a story, but when you ignore something as big as a foreclosure crisis with “more than four million delinquent loans,” you are not writing an unbiased story. You are creating propaganda that gives a completely false picture of the economy. If you are reporting the news, your job is not to make people feel good. It is to give them the facts and analysis that delivers a clear picture of what is truly going on. The MSM is simply not doing its job. In the next meltdown, the excuse “Nobody saw this coming,” will not be credible and neither will the MSM. After all, that was what they said in 2008.

The Federal Reserve Has been CHECKMATED! QE to Infinity